Living with Bad Credit: Getting a Car Loan

If you are in the market for an auto loan, you should know your bad credit score can make it difficult to secure financing. While obtaining an auto loan isn’t impossible, it can be more of a challenge, so it is important to know what to do and where you should look as you attempt to obtain a car loan. By knowing how tofind an auto loan even with bad credit, you will be driving off in your new car in no time.

Shop Around

Not all lenders will view your tarnished credit history the same way, and some may view it in a more positive light. While many financial institutions may be willing to give you an auto loan in spite of your credit situation, it may take some work for you to locate them. Therefore, it is important to not rely on the dealer to find financing for you, as this can likely result in higher interest rate and hidden fees that you may not need to pay if you secured your own financing.

Know Your Credit Score

When it comes to auto financing with poor credit, it is vital that you know what your credit score is, as this score is a major factor in whether or not you will get approval for a loan. This knowledge allows you to have more confidence when you are making your way through the loan process. If you find that you are close to a ranking that would provide you a lower interest rate, you may decide that it is better to wait to secure a loan until your credit score has reached that point.

Have Realistic Expectations

When searching for a bad credit loan you will likely find that you need to pay more in order to obtain it. The interest rates charged by your financial institution will be considerably higher than those given to individuals with a higher credit rating. As a general rule, if your credit score is lower than 620 you will be considered a sub-prime borrower, and this means that you are not going to qualify for the loan offers with lower interest rates. Therefore, it is important to be realistic about the car you are hoping to purchase, and by thinking practically you will have a better chance of securing a loan.

Avoid Yo-Yo Traps

Many individuals with bad credit are taken in by a yo-yo trap tactic at the hands of dealers. In these situations, buyers are offered a type of conditional financing so that they can take their vehicle home on the spot. The dealer will allow you to take the vehicle home under the impression that financing had been secured, when it actually had not. Several days or even weeks later, the dealer will contact the customer to indicate that there was a problem with financing and that they will need to pay a considerably higher interest rate.

Clean Up Your Financial Act

Missing or making late payments on your debt isn’t a smart idea and it can make securing an auto loan even more difficult. This becomes especially problematic when you miss payments during the months immediately preceding your application for a loan. Even lenders who have a history working with customers who have poor credit will likely feel uncomfortable giving you an auto loan in these situations.

If you have poor credit, it is important to know that you are not alone. It is still possible for you to secure financing for an automobile by obtaining a loan for people with bad credit. By following a few simple steps, you can work to find a loan to get the car you need without damaging your financial situation.

Amy Johnson is an active blogger who is fond of writing articles on Bad Credit Loans and advising people to get mortgage even with bad credit. Follow her on Twitter to know more on how to get a car loan with a poor credit history.